UK to write-off its share of Third World debt

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Britain is to write off its share of debts owed by the world's poorest countries to the World Bank, Chancellor Gordon Brown will announce today.

And he will throw down the gauntlet to other rich nations to do the same, in a bid to lift the crippling burden of debt repayments from Third World nations, Treasury sources confirmed.

His initiative was hailed by aid charities and is expected to be warmly welcomed by Labour activists at this week's annual conference in Brighton.

The UK holds around 10 per cent of the total debt owed to the World Bank and other development banks, which itself amounts to 70 per cent of the money owed by the world's poorest nations.

Brown's move will put pressure on other major creditors such as the US, Japan and Germany to follow suit at meetings of the IMF and World Bank next week. France and Canada are already understood to be planning similar announcements.

Brown currently holds the chair of the IMF and has long promoted policies to solve the international debt crisis, including 100 per cent relief on bilateral debt owed directly to the UK by heavily-indebted poor countries. Campaigners believe that his initiative could mark a turning point in efforts to lift the burden of debt on the developing world and free Third World governments to devote a higher proportion of their budgets to health, education and economic development.

Brown's announcement will come in a speech at St Bartholomew's Church in Brighton as part of the Vote For Trade Justice event ahead of the Labour conference.

Treasury sources confirmed that he will call for the international community to provide up to 100 per cent relief of multilateral debt.

And he will argue that rich countries should provide extra cash to fund the relief, rather than paying for it from existing aid budgets or running down support for international institutions.

He will say that, even though there is no international agreement to write off debt, Britain is ready to pay off its share of debts owed to the World Bank and the African Development Bank.

The UK's initiative will cover not only heavily indebted poor countries, but all low income countries, as long as they can ensure debt relief is used for poverty reduction, he will say.

The UK will also continue to call for the debt payments owed to the IMF to be funded through the more efficient use of IMF gold reserves in a way that would not affect the gold price.

''Breaking the log-jam on debt in such a way is exactly what debt campaigners across the UK have been calling for,'' he said.

''Once again the British government appears to be taking the lead to tackle the problems of international debt.

''If other countries follow suit, this move could herald the turning point in efforts to end the burden of crippling international debt and offer a fresh start to the world's poorest countries.

''This is Gordon Brown at his boldest, throwing down the gauntlet to the other G7 members ahead of next week's IMF-World Bank meetings. If other countries can meet the challenge, the international community will be taking real steps towards changing millions of lives for the better.''

Lovett added: ''Next week's annual IMF-World Bank meetings give the chancellor the opportunity to put the icing on the cake and push for a revaluation of IMF gold stocks.

''Such a move would instantly raise around STG32 billion ($A80 billion) which in turn could make massive inroads into unsustainable levels of debt owed to the IMF by the world's poorest countries.

''If Gordon Brown can deliver this debt double whammy he'll have made the biggest difference on debt for years.''